The head and heart of a family business

Sifting through files my first few days on the new job, certain pieces grabbed me, especially those about national family-owned businesses, since I was being asked to help family businesses in Maine.

One was that the notion that big corporations rule. Family businesses make up a whopping 80 to 90 percent of all businesses in North America, according to American Management Services’ Family Business Statistics. Similar numbers apply in Maine. That retires any notion that moms and pops are a dying breed; however, major corporations are often family owned. Among companies listed on Standard & Poor’s 500 Index, 34 percent are family businesses.

Another fallacy: Large corporations employ the most people. Not so. Family-owned businesses account for 60 percent of total employment, 78 percent of all new jobs and 65 percent of wages.

Here in Maine, where family-owned businesses are rocks beneath the economy and where independence is family treasure, family-owned businesses that are tapping into global sales markets have blossomed: L.L. Bean, Hussey Seating and Thos. Moser Cabinetmakers are brands recognized across the U.S. and frequently abroad. Family enterprises making a regional impact include Downeast Energy, Johnny’s Selected Seeds, Gifford’s Ice Cream and Lee Auto Malls.

Each helped develop the Institute for Family-Owned Business. It was Shep Lee and his daughter Cathy, of Lee Auto Malls, who took the institute concept to University of Southern Maine administrators in 1995 to “establish an educational resource that would enable business-owning families to reach their fullest potential.” The Institute, a 501(c)(3) nonprofit, today is governed by an all-volunteer board of directors and executive director.

A firm that takes part in institute programming is LT’s Inc., a 20-year-old Portland silkscreen and embroidery company. KC Hughes, the 55-year-old company president, found that his background in personnel squared with the marketing experience of company founder Linda Tobey, his mother. KC’s sister, Kris Hughes, keeps the books. KC describes the family as “incredibly close … we don’t agree on everything, but we do agree to trust each other’s knowledge and intuition.”

Twenty years and two generations speak highly for LT’s, which, however, must answer “who will take over?” Next in line is KC’s 12-year-old daughter, followed by his 10-year-old son. “Theoretically, the business will be here when the kids finish college, unless I burn out,” KC adds.

In any five-year period, nearly 40 percent of family businesses will hand the keys to the next generation, but when that occurs the statistics are alarming: Only 40 percent survive to the second generation, 12 percent the third generation and 3 percent the fourth. The reasons behind the failure rate are ubiquitous.

Sons and daughters understandably want to follow their own dreams. There’s also a drop-off when junior tries running the company a new way, his way, which often detours from a successful path.

Forgotten is the value system and philosophy that built a successful company. Dad was very good at problem solving, developing intricate communication channels, improving service and standing by his word. A family-business owner said, “Having your name on the door provides an exceptional opportunity for economic reward, developing a family legacy, and giving back to the community.”

So what happens when a family looks back and there’s no one to pass the baton to? Guy Gannett Publishing (which owned Portland Newspapers, smaller papers and broadcast properties), after 78 years in one family, was sold. L.L. Bean brought in its first nonfamily CEO — in 2001 — to head its global operation.

Succession frequently runs up against emotion in family-owned businesses: dissimilar passions, discord among stakeholders, parent-child mutual respect is lacking and family communication and trust are threatened. These knotty issues often will prematurely dissolve a family business. The institute must help forge solutions, yet remain neutral and credible.

Women-owned family businesses, another dynamic, is increasing at the rate of 37 percent every five years. There’s also evidence that women-owned family businesses have higher success rates than ones controlled by their male counterparts. It’s also bringing with it all shades of opportunities and challenges, not the least being sibling relationships.

Through consultations, seminars and workshops, the Institute for Family-Owned Business has helped businesses for 17 years by presenting options for succession by looking closely at family participation and the work environment, addressing communication and, perhaps most importantly, getting our arms around business practices and strategies.

While “work hard and survive” is voiced by many, it was Howdy Holmes, former Indy 500 race car driver and current CEO of family-owned JIFFY Mixes, speaking at the 2011 Maine Family Business Awards, an Institute initiative, who may have offered direction when he said, “Relate to your business with your head, to your family with your heart.”

That’s a challenge.

Gina Weathersby is the executive director of the Institute for Family-Owned Business in Brunswick.

Editor’s note: The Bangor Daily News welcomes submissions for business columns. They should be 650-850 words and should be unique to the BDN and pertinent to the Maine business community. Columns, a head-and-shoulder photograph and a short biography can be sent to business@bangordailynews.com.